I am Forbes' Opinion Editor. I am a Senior Fellow at the Manhattan Institute for Policy Research, and the author of How Medicaid Fails the Poor (Encounter, 2013). In 2012, I served as a health care policy advisor to Mitt Romney. To contact me, click here. To receive a weekly e-mail digest of articles from The Apothecary, sign up here, or you can subscribe to The Apothecary’s RSS feed or my Twitter feed. In addition to my Forbes blog, I write on health care, fiscal matters, finance, and other policy issues for National Review. My work has also appeared in National Affairs, USA Today, The Atlantic, and other publications. I've appeared on television, including on MSNBC, CNBC, HBO, Fox News, and Fox Business. For an archive of my writing prior to February 2011, please visit avikroy.net. Professionally, I'm the founder of Roy Healthcare Research, an investment and policy research firm. In this role, I serve as a paid advisor to health care investors and industry stakeholders. Previously, I worked as an analyst and portfolio manager at J.P. Morgan, Bain Capital, and other firms.

Fareed Zakaria's Puzzling Take on Health Care in Britain, Taiwan, and Switzerland

Last night, CNN aired a special hosted by Fareed Zakaria, entitled “Global Lessons: The GPS Road Map for Saving Health Care.” In it, Zakaria discusses a problem that I write regularly about: what can we learn from other countries about how best to reform the American health care system? Zakaria makes some useful points over the course of his hour-long telecast, but ends up agreeing with the conventional progressive wisdom that America’s health care failures are a result of the free market. It won’t surprise you to learn that I disagree.

Zakaria opens by repeating some of the misleading statistics that are often tossed around about American health care. We have poor life expectancy (debunked here). We have poor infant mortality (debunked here). Etc. He then goes on to praise Britain’s National Health Service as a worthy model, soft-pedaling its terrible health outcomes, arbitrary rationing, and rapid cost growth. “Britain’s government-run system provides good care for all, and is more cost-effective than one might imagine,” Zakaria cheerily claims, while grudgingly conceding that “the quality of its care can shift as funding waxes and wanes.”

Taiwan tries “Medicare for all”

Zakaria goes on to discuss the interesting case of Taiwan. Taiwan recruited Harvard economist William Hsiao—best known among U.S. health wonks for his institution of price controls under Medicare—to bring universal coverage to the island nation. In 1995, Taiwan instituted a single-payer plan called National Health Insurance, which can be fairly described as “Medicare for all.”

There is a single-payer system on the insurance side, but hospitals and doctors remain private. Within one year, Taiwan went from having an uninsured population of 41 percent to 8 percent. Every NHI patient carries a smart card, with 32 kilobytes of memory, that contains rudimentary patient and billing records: something that does a lot to limit wasteful and fraudulent spending in the Taiwanese system.

So, what’s not to like? Quite a lot. Recent health spending growth in the Taiwanese system is similar to that of the United States: about 5 to 6 percent a year. While the Taiwan government has succeeded in raising premiums twice to cover the rapid spending growth, these premium increases have been unpopular, and it’s likely that future governments will find it difficult to enact further premium increases. “Don’t expect politicians to do something unpopular like that very often,” notes Zakaria.

Already, the Taiwanese system is spending more on health care than it is taking in on premiums, and borrowing to finance the rest. The government is starting to ration care to keep spending in line with revenues.

When Taiwan’s single-payer system is 50 years old, like Medicare is today, it’s more likely to look like a failure than a success. Voters hold the line on premium increases, but have no control over system-wide spending. It’s a recipe for disaster.

Zakaria claims Switzerland is “a version of Obamacare”

“Imagine an alternate universe in which a version of Obamacare has been the law of the land for almost two decades,” says Zakaria in introducing the Swiss system. Huh?

The ins-and-outs of the Swiss health care system will be well known to my readers. And while it’s true that one segment of Obamacare is similar to that of the Swiss system—the state-based exchanges for some lower-income individuals—the huge, and central, difference between Switzerland and Obamacare is that Switzerland applies this same model to the poor and the elderly. Obamacare, crucially, does not: instead, it leaves Medicare’s core structure intact, and indeed massively expands Medicaid to 17 million more people.

Not only that, but those who have tried to apply Swiss-style reforms to Medicare, like Paul Ryan, have been excoriated by the White House for seeking to impose a “radical” system that would force Medicare to “wither on the vine.” None of this, for whatever reason, bears mention in Zakaria’s program, in which he implies that conservatives are nutty and misinformed for allegedly opposing Swiss-style health care in America. Actually, it’s Zakaria who is misinformed.

If Obamacare truly converted the American system into Switzerland—by privatizing Medicare and Medicaid, and using the savings to expand coverage to the uninsured—President Obama could have gotten bipartisan support for his proposal. He proposed nothing of the sort.

Zakaria’s one useful service in this regard is that he interviews David Goldhill, author of the outstanding Atlantic piece on “How American Health Care Killed My Father.” Goldhill advocates consumer-driven health care, much like the kind that is widely prevalent in Switzerland. “If Medicare had said to my mother, ‘You pay the bill,’ and the hospital had come to my mother and said, ‘Here’s what we’re charging you for killing your husband,’ the collection would have been zero. There’s no way my mother would have paid that bill. There’s no way any of us would have paid that bill,” Goldhill tells Zakaria.

Zakaria: Markets “simply can’t work”

Zakaria concludes his piece by uncritically citing Ken Arrow’s critique of free markets in health care—one I continue to contest. “I’m a big fan of the free market,” Zakaria says, but “Kenneth Arrow outlined in the 1960s why markets don’t work very well in health care…a pure free market model simply can’t work.” But Arrow’s critiques suggest we should have a more market-oriented system, not less, by encouraging more consumer-driven health care.

Zakaria repeats another fallacy of the conventional wisdom, that “the United States has the most marketized health care system in the world.” But this isn’t true: more than half of our health-care spending is state-sponsored, nearly all of it single-payer. We have a lot to learn from countries whose systems run more in the free-market direction, like Switzerland and Singapore.

Next time, Zakaria’s producers should call me.

“Global Lessons: The GPS Road Map for Saving Health Care” re-airs on CNN next Saturday, March 24, at 8:00 and 11:00 p.m. ET & PT. It will also air on CNN International on March 24 at 9:00 p.m. ET.

UPDATE: Zakaria has published an op-ed in Time that echoes the points he makes in the CNN broadcast:

In 1963, Nobel Prize–winning economist Kenneth Arrow wrote an academic paper explaining why markets don’t work well in health care. He argued that unlike with most goods and services, people don’t know when they will need health care. And when they do need it–say, in the case of heart failure–the cost is often prohibitive. That means you need some kind of insurance or government-run system…

Maybe there’s a theoretical pure free-market model out there that would work. But in the world we know and live in, the task is not to abolish our system for a utopia that has never actually existed anywhere but rather to accept the messy, mixed-up reality that we have and try to improve it to allow people to have access to decent health care at an affordable price–something every other rich country in the world already does.

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first, i can’t imagine why anyone should go to an ENT for a cold. in the states, most people with cold just stay home and nurse it unless it becomes a bacterial infection. in a system where it is designed to pay doctors and nurses (workers) so cheap to control cost, who are made to work very hard with extreme productivity (200 patients/day for 12+ plus shifts), abusive use of service will happen.

regarding your point about surplus of taiwanese people wanting to become a doctor despite the hard work they have to endure, i am reminded of one of the reports where more than 1000 people in china waiting in line everyday to get a job at sweat shops. example: apple store in china.

so the taiwanese government controls then number of doctors produced each year in order increase productivity and reduce cost. doctors serve 200 patients/day and work more than 12 hours per shift. does it sound like sweat shop system to you?

what would happen if these doctors unionize (like nurses in the states) and demand to cap a number of patients they see a day and limit hours of work? i guess it is hard to think of doctors as workers.

I understand U.S. is the most typical example of capitalism. So, I won’t be surprised to find this comment economical-sounding. But really and truly, you need to realize it’s a different country under different culture you are referring to. The truth is: they are REAL in Taiwan. The health care system there makes sure everyone gets immediate medical care when they need to. And the ratio, to your surprise, will never diminish. Doctor is considered the most prominent occupation in the society. Thousands of students try to get in medical schools there. Parents often push through the process. (And again, if you do study Asian culture, you will know how obsessed the students and parents alike are about scores. It’s all about going to a famous school and getting a fancy job after graduation to earn respect among society.) Put it this way, if you are the kind of doctor who is not willing to do such a job, it’s completely fine. Why? Because there is a long line of others behind you, waiting to take over your position. If you want to talk economical, here’s a comment for you. Taiwan is a small island country. High social competition is felt island-wide. Tons of people want to be successful. So, yeah, get real, dude.

Late reply I know but I just saw this article. Jay, I am a physician and if you actually think even an ENT can see 200 patients a day, you are seriously delusional. This is the kind of unrealistic thinking that pervades the healthcare discussions. Of course if you had no patient that takes more than 3 minutes, no charting to do on all those visits, no labs or tests to follow-up on from previous visits, no patients to see in the hospital, no breaks, lunch or bathroom visits (man, an upset stomach might put you back 2 patients), no calls to take from primary care docs, no prescriptions to write …. you get the point, then you STILL wouldn’t come close to seeing this many.

I landed here looking for the show online, somehow your link tops the Google search results for Zakaria’s special.

Avik wrote “We have a lot to learn from countries whose systems run more in the free-market direction, like Switzerland and Singapore.” But it’s your core audience and a rigid ideology that prevents even systems that are more free market but guarantee universality (the key to cost control).

Nitpicking Taiwan’s system you say “So, what’s not to like? Quite a lot.” and then you only mention spending growth. But they went from 92% vrs 59% coverage in one year, that’s pretty amazing and seems to put spending growth in perspective. And pointing out that in 50 years there will be a serious problem?!! We in the US have a serious problem now (maybe not Forbes readers, but the rest of us that don’t wear bow ties and smoking jackets at country clubs.) It seems that over 50 years, Taiwan might manage to make some minor changes to what seems like a pretty good system.

What I would like to hear from the right of the healthcare debate is: 1)Show us a functioning model elsewhere in the first world in a similar culture with a large population where your ideal system works. I have nothing against Switzerland or Singapore but they are both tiny by comparison to us, and are both culturally quite different. 2)Show us some first world countries with any form of universal health coverage that want to undue their systems and replicate the whole of the US “model.” I have heard conservatives pointing to surveys where some countries are dissatisfied with their care. Many countries have instituted market reforms of various sorts. But I have yet to hear of any first world country with universal coverage that wants to revert back to our “wild west” approach to health care.

“Obamacare” is a compromise. Many of us on the left think “Obamacare” compromises too much to make it more free market than it should be. But at it’s core “Obamacare” is what the right was suggesting in opposition to Clinton’s attempt at universal coverage decades ago. Why is it when it comes to education for example, the right insists on outcomes only and measurable data. But with health care, we can spend much more, get poorer outcomes and the right says we have to buy the more expensive product.

The real truth of the matter is that the right is afraid that if the US really does get a decent universal health care system it will be as popular as Medicare and Social Security which they vehemently opposed and are extremely popular.

“1)Show us a functioning model elsewhere in the first world in a similar culture with a large population where your ideal system works. I have nothing against Switzerland or Singapore but they are both tiny by comparison to us, and are both culturally quite different.”

First, you will have to defend your assumption that these other countries’ models can’t apply here due to “cultural differences.” Then you will have to list the countries that meet your specified criteria.

“2)Show us some first world countries with any form of universal health coverage that want to undue their systems and replicate the whole of the US ‘model.’”

I never said that the US was a model — quite the opposite. The models are Switzerland and Singapore.

1) Most of the first world (spanning all sorts of culture) has some sort of government mandate to universal access. Cultures as disparate as Singapore to Canada have some form or other of universal coverage. Very homogeneous countries like Japan, to diverse countries like Canada, Australia, Netherlands. As best as I can tell virtually nobody in that group wants to emulate the US. Though you say you aren’t putting up the US as a model, you seemed pretty apologetic in your debunking link “The Myth of Americans’ Poor Life Expectancy”. And again your side won’t concede the basis for your two examples: government mandates and tax subsidies.

2) Seems the lesson might be learned. If all the possible ways to get to universal coverage: public hospitals (like in Scandinavia and the UK) or private hospitals with public funding (like in Canada and Taiwan) or a personal mandate and subsidies for low income (like Switzerland and Singapore,) if virtually nobody in any of those systems wants what we have, why not ANY of the other universal systems? Better yet, why not just a mandate that states achieve universal coverage and cost control, and let states pick how. Maybe Vermont would hold up Norway as an example, and Mississippi could try emulating Singapore.

Hey, if you want to get a Swiss version of health care to the US. I’m ready to compromise! But can you get your side behind a mandate that everybody be forced to buy private insurance from a government approved list of insurers? And can you get Grover and his bow tie clad private jet setting friends to subsidize the poor with tax dollars? That’s how the two systems you advocate work.

I lived right on the Swiss border a couple decades ago. I liked Switzerland alot, I’d go over and shop at Migros and watch kids on bikes ride down cobbled streets with assault weapons on their backs. We used to joke about how backwards they were, having only allowed women the vote in the last canton in the 1970′s. Though I was there prior to their universal system, I think looking to cultures that are larger and/or more similar make sense: diverse open cultures like NL, bigger countries like DE, FR or most logically very similar medium sized nations like Canada, UK, Australia.

But again if you can get your peeps behind a Swiss style system, by all means please do!

Switzerland has four official languages. NL has one. DE has one. FR has one. UK, AUS, have one. Only Canada has two.

What you’re really saying, but won’t admit, is that you don’t think Switzerland is a model because it doesn’t have enough brown and black people. Is it your view that brown and black people require a special form of health care financing? If so, why?

But yes, I do see Switzerland as a model, minus the mandate, as I discuss in the Switzerland piece. And I do aim to persuade as many Republicans as possible that it is a good model.

Switzerland has four official languages. They do have guest workers etc. But when I was in high school in San Jose, California even back then in the 1980′s there were said to be over 60 different languages spoken in the homes of our students. Race, ethnicity, and most importantly income disparities all play roles in healthcare.

What I am saying is that Switzerland is TINY, unusual, and relatively racially, ideologically, culturally, very different from us. If you wanted to see how well anything works you might want to test it out in a variety of circumstances. If it was a building material, if you wanted to sell it in the entire US, you might want to test it out in Phoenix and Seattle. If you said it was the answer in the US but had only been used thus far in Iceland, there might be some variables you need to consider first before it is the solution for all the US. Right?

As for race, what would you say about a drug that had only been tested only on say one small homogeneous sub group? Not to say there’s no data there. But if you had other drugs that did well that were tested all over the world on spanning cultures large and small diverse and homogeneous…. I think those are much better examples.

But again, if you can get Grover and friends to give us a Swiss or Singaporean model…. I’ll take it and bow to your wisdom! I’m glad you are willing to compromise on taxes and government mandates and standards and such. But almost all of your side of the aisle seems so rigidly clinging to ideology over fact I can’t see it happening.

I really like the way Fareed points out the flip: how back in the 1960′s you can imagine a university professor talking about a Marxist utopia. Now the right lives in their own lala land where only untested ideologically pure ideas can float around as though they were supported by facts. Hope YOU win this debate instead of them!

The problem is that conservatives have not historically put much thought into what their ideal health-care system would look like. This is starting to change, given the fiscal necessity of health-care reform. It will take a few years…

But to be honest, don’t you think this has been discussed before? Before our time Eisenhower and Nixon had plans. In my adult life, the Republicans offered in opposition to the Clinton plan. The previous Republican plan was similar to what we now call “Obamacare.”

At the root of the whole problem is an ideology that thinks that government by its very nature is the problem- while at the same time trying to run government. It seems pretty obvious what the end result will be.

I wish we could just all step back and look at our world and economy and try to honestly figure out what would work best for us as a society. There was an interesting story recently about Colorado Springs where voters decided to privatize a bunch of public services. One example was of a gardener who was laid off from the city, then got his job back for the private firm that got the city contract, albeit without as good compensation. Oddly enough the city paid about the same as before for services, but the ideologue voters were still happy because they hate government so much.

The year I was born, 1969, the highest tax rate was about double what it is now (there were loopholes then and there are now too.) Very few on the left advocate nationalization of industries, or seriously pro-union rules, or any of the other historic dogmas of the far left. Go down the list, I think we’ve been perhaps too reasonable over the last couple decades. And in some cases it worked out ok. But oddly enough I continually hear the right point backward in time to our “golden years.” With phrases like “restore our future” you’d think that taxes were really lower under Reagan (or Eisenhower, Nixon, or Bush I) than Obama.

But on the right, Grover and friends want to lock in taxes at their lowest rate in generation so as to “drown the baby”. We’ve heard over and over that raising taxes is bad for the economy, but oddly enough Taxes were higher under Clinton than Bush, and we know how that turned out. Grover and friends want spending cuts but are very, very quiet when it comes down to specifics. Give us a list, and show us how the books will balance in the end. We can’t seriously address our “books” without addressing healthcare. And we can’t address healthcare unless it is in (any) context of universal coverage.